Total employment
is now 5.1 million above the previous peak. Total employment is up
13.8 million from the employment recession low. Private payroll
employment increased 230,000 in February, and private employment is now
5.5 million above the previous peak.

Private employment is up 14.3
million from the recession low. In February, the year-over-year change
was 2.67 million jobs. The private sector has chalked up 72 months of
uninterrupted job gains, the longest streak on record.

As we look at the different sectors where jobs were created or lost, a
theme develops; the sectors involving energy, natural resources, and
international trade were hit while the sectors that mainly involve the
domestic economy seem to be prospering.

The mining sector, which
includes oil and gas producers, cut jobs for the 17th straight month
amid falling oil prices (down 18,000). After a 23,000 gain in January,
manufacturers cut 16,000 jobs – that could be a one-month blip but could
also suggest falling demand from overseas is hurting U.S. exporters.
The transportation and warehousing sector, which is heavily involved in
global trade, also cut jobs.

Retailers posted strong employment gains
for a second month, along with the health care industry. Payrolls at
retailers climbed about 55,000 in February after a 62,000 advance a
month earlier, while health care employment increased 57,400. Leisure
and hospitality added 48,000 jobs. Construction companies added 19,000
workers. Government jobs increased by 12,000, which seems to be part of a
trend away from public sector job cuts, which were the norm for most
of the past 7 years.

The labor-force participation rate
moved up to 62.9%, the highest level in over a year, as more than half a
million people joined the labor force. Over the last three months, that
number totals 1.52 million, the highest it has been in 16 years. The
improving job market is drawing Americans back into the labor force. The
labor force participation rate is a measure of Americans working or
looking for work; so it doesn’t measure jobs to the entire population,
but rather jobs compared to the potential labor pool.

The participation rate took a big drop following the financial crisis
as people abandoned job searches because there were no decent jobs to
be found. Another reason for the falling participation rate is
demographics; baby boomers started retiring at the rate of 10,000 per
day; for many boomers, it was involuntary retirement. The rate kept
falling even as employers started hiring again.

In September, the
participation rate hit 62.4 percent, its lowest level since 1977. The
BLS calculates there are still 7.8 million unemployed workers, but that
is a measure of unemployed who are looking for work. Even with the
improvement in this month’s report, there are still millions of who
aren’t working and are not actively looking for a job – they are not
counted. It’s like they are invisible. But many of those people might be
lured back into the labor market if the right job comes along.

A
stay-at-home mom, for example, might not be looking for a job, but if
she hears from a friend that a company is looking for someone with her
skills, she might apply. Sure enough, most of the people entering the
labor force have a job already lined up; relatively few are joining to
look for work.

A separate unemployment gauge (the U6)
that includes those not actively looking for a job or at work part-time
for economic reasons fell to 9.7 percent, the lowest reading since May
2008, but that still represents about 6 million people.

Job quality in
February was titled toward part time, which the household survey
indicated grew by 489,000, while full-time positions increased by just
65,000. And this is the downside to an increase in the labor force
participation rate – as more people move back into the labor force, even
if it is part-time work, there will be more competition for available
jobs, holding down wages.

Despite the big gain in new jobs, average hourly wages fell 3 cents,
or 0.1%, to $25.35. Hourly pay rose a mild 2.2% from February 2015 to
February 2016. That’s down from 2.5% in the prior month. The average
work week for all workers declined by 12 minutes to 34.4 hours; another
indicator of weakness, because in a strong economy workers rack up
overtime, and when you see too much overtime, employers hire a new
worker.

The report’s household survey, from which the jobless rate is
calculated, did however signal employees may soon get the upper hand in
wage negotiations as the pool of those available to work continues to
shrink. The share of the working-age population with a job climbed to
59.8 percent, the highest since April 2009.

So, as long as workers keep
pouring into the labor pool, the employers have the upper hand, and that
is the case now; but eventually the flow of workers back into the pool
will dry up, and workers will have the upper hand.

The Federal Reserve and economists look at the jobs picture and try
to determine when we have reached “full employment” – that magical place
where almost everybody who wants a job can get a job, but the economy
doesn’t get overheated as wages increase pushing inflation soaring.

In
the past the Fed told us that they thought we would find ‘full
employment” when the unemployment rate dropped below 5%; well, we’re at
4.9% and still pulling new workers in off the sidelines. And the reality
is that after all these really strong job gains, there are fewer and
fewer people on the sidelines.

Today’s stronger than expected jobs report means a rate hike is still
a possibility when the Fed FOMC meets March 15-16, meanwhile a dip in
wages means the Fed might wait. Wall Street seemed to like the report,
it was good enough to show economic strength but not so strong that it
forces the Fed to move quickly.

The consensus is that the Fed won’t
raise rates in March, but they might very well try to set the stage for a
future rate hike by changing some of the wording in their policy
statement; setting up the market for a hike in April or June. And even
though the Fed will look at the new jobs added to the economy, they will
also need to address the weakness in wage growth.

Wages are a major driver of economic growth because workers spend
their wages, creating demand – or at least that is the theory. It’s
really a story about how money circulates. For pay to accelerate,
the economy needs to pick up the pace. One way that can happen is if
workers start to spend more of the income gains they’ve already received
— something we saw a hint of in January’s stronger-than-expected
increase in consumer spending.

Also, productivity is crucial: The more
workers produce for every hour on the job, the more companies can afford
to pay them without increasing prices. So far, that’s not happening.
Nonfarm productivity has grown at an annualized rate of just 1 percent
since mid-2009, less than half the average pace of the previous two
decades.

So that brings us to a key question
about the economy and the labor market. Can we see continued job gains
plus wage increases in 2016? If the labor force keeps growing at a solid
pace, all those new entrants will keep the downward pressure on wages.

On the other hand, it might take higher wages to keep pulling people out
of their homes and into the workplace. And this all assumes that the
strong rate of job creation, 242,000 positions added in February, plus
positive revisions to previous months, doesn’t get undone by a new round
of Federal Reserve interest rate increases and volatile global markets.
So far the balancing act seems to be working.

A couple of extra news items today:

The US trade deficit widened
more than forecast in January as exports slumped to the lowest level in
more than four years. The gap grew 2.2 percent to $45.7 billion, the
largest in five months, and up from a revised $44.7 billion in December.

Exports and imports are both tracking negative. Soft growth plaguing
U.S. trading partners is also reducing the amount of goods and services
the world’s biggest economy can ship out, pinching manufacturers. Demand
from American consumers will be needed to pick up the slack, putting
even more importance on an improving labor market that translates into
real wage growth.

Also, there was very important news out of Brazil today. Former Brazilian President Luiz Inacio Lula da Silva
was detained for questioning in a federal investigation of a bribery
and money laundering scheme that police said had financed campaigns and
expenses of the ruling Workers Party.

Now, keep in mind that Brazil,
even though it is considered and emerging economy, it is the 9th
largest economy in the world and the largest economy in South America.
Lula’s detention was the highest profile arrest in a sweeping corruption
investigation that has ensnared powerful lawmakers and business
executives.

Police, who arrested Lula at his home near Sao Paulo this
morning and he has since been released, said they had evidence that Lula
received illicit benefits from kickbacks at state oil firm Petrobras in
the form of payments and luxury real estate.

The evidence against Lula
brought the corruption investigation closer to his successor and current
president, President Dilma Rousseff, who is fighting off impeachment
over an unrelated issue and who is struggling to pull the country out of
its worst economic downturn in decades. Brazil’s real headed for the
best week since October 2008 and the Ibovespa stock exchange jumped.

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